FORT LAUDERDALE, Fla. — The 4th District Court of Appeal recently kept alive a legal-malpractice suit against foreclosure defense attorney Robert Lithman and two firms by allowing one of the plaintiffs to continue its case.
According to a report by Daily Business Review, the defendants in the suit — Lithman, law firms Robert P. Lithman P.A. and Orshan Lithman Seiden Ramos Hatton Huesmann & Fajardo — are accused of mishandling a $9.7 million lawsuit by the Federal Deposit Insurance Corp.
The plaintiffs — real-estate company RSB Ventures Inc. and its principals, Nasser Mizrahi and Dr. Veronica Motiram-Mizrahi — have alleged that Lithman did not respond to an FDIC motion to dismiss or make a timely file of a notice of appearance.
The appellate court agreed with Broward Circuit Judge John Thomas Luzzo that the Mizrahis did not yet have grounds to sue for malpractice.
However, the court said the trial judge has been mistaken in regards to RSB Ventures, which already had lost the FDIC foreclosure lawsuit.
"Thus, even though collateral issues have not been resolved in the underlying litigation, a foreclosure judgment adverse to RSB has reached the point of finality, so RSB's legal-malpractice claim has accrued with respect to the foreclosure judgment," Judge Carole Taylor wrote for the appellate court.
Judges Jonathan Gerber and Mark Klingensmith agreed with the decision.
At the heart of the case is a loan to RSB Ventures from Florida Community Bank in order to purchase “a 6-acre Hollywood parcel zoned for commercial use and a 19,123-square-foot drug store on 2 acres in Boynton Beach.” That was before the bank failed in 2010. The FDIC wanted full repayment.
According to court documents, RSB filed a complaint in April 2010 in state court against the FDIC and several other defendants, “seeking rescission of the loan and asserting claims, among other things, for fraud, conspiracy, breach of fiduciary duty, and unjust enrichment.”
The FDIC filed a counterclaim against RSB and also made a cross-claim against the Mizrahis in order to foreclose on the mortgage and recover both on the promissory note and from the Mizrahis as guarantors. RSB and the Mizrahis answered the respective claims against them. RSB amended its complaint against the FDIC, which filed a motion either to dismiss the amended complaint or for summary judgment.
Berlowitz allegedly acknowledged he made a mistake when he sued the FDIC, considering that it paved the way “to the FDIC filing the counterclaim for foreclosure,” court documents said. The appellants contacted Lithman about representing them in December 2010 in the FDIC litigation.
Berlowitz and his law firm were allowed to withdraw from the case in April 2011. Lithman and the defendants did not file a notice of appearance nor respond to FDIC’s motion to dismiss in a timely fashion.
Later in 2011, according to court documents, the district court entered a default final judgment of foreclosure against RSB. Lithman later entered a notice of appearance in the case and a notice of appeal for the appellants. But in February 2012, the 11th Circuit dismissed the appeal on the basis of lack of prosecution. Lithman was allegedly negligent in failing to prosecute the appeal.
The property later sold at a public sale in September 2014 for $4.8 million. The court closed the underlying lawsuit with no deficiency judgment against the investors and no judgment against the Mizrahis in the cross-claim, according to documents.
Siegfried Rivera and the Lithman firms were hit with a two-count legal-malpractice complaint from the investors, seeking damages “for the foreclosure final judgment, reimbursement of more than $144,964 in attorneys' fees awarded in the foreclosure case, additional attorneys' fees, loss of rights to the property and a potential deficiency judgment against the individual investors,” according to Daily Business Review.
Although Lithman was successful in moving to dismiss the case before Luzzo, the appellate panel decided RSB Ventures would be able to bring the claim.